...Part 1:..
Futuristic Glimpse/Expected Growth
Trend.....Part
2:.. An
Industry at an Inflection Point?.....Part
3:..Modular Frontiers.... Part
4: . Where
and How Do We Make Money?.....Part
5.
..Robo Political Economy.....Part
6....Robo Supremacism, Integration,
or Something Else?

....

Part
I

FUTURISTIC
GLIMPSE
AND AN EXPECTED GROWTH TREND

First posted Feb 2005

Chicago, Year 2035. The people who own stock
in U.S. Robotics Corp., whose headquarters forms a distinctive
pinnacle in the Chicago skyline, are among the wealthiest people
in America. The company is now introducing its latest line of
NS-5 humanoid
robots, one robot for every four American households. America
is obviously in the process of becoming completely transformed
by robotics. However, there is a dark side. U.S Robotics calls
in a detective to investigate the murder of a robot scientist.
Very shortly the detective begins to suspect the culprit to be
a robot.

...And so the story
goes in the sci-fi detective action adventure flickI,
Robot released in July 2004. Actually
the more sobering robot story has already taken place. Sony released
its QRIO humanoid
robot in Sept 2003. This is a lot more
than just another cute and friendly “entertainment”
robot. Not surprisingly, most Americans failed to notice, just
like most Americans seem perpetually oblivious to their country's
out-of-control debt
growth and balance
of trade deficits.

The purpose of this
paper is to provide an overall perspective regarding an incredibly
vital and strategic emerging industry. Most mobile robot companies
today are privately held, therefore hot stock tips will have to
wait. But it is by no means too early to address more general
questions. Does I, Robot create a misleading impression
of the future “promise” of robotics?

Where is robotics
today? Where might it be in five to ten years? Where are businessmen
likely to make money in this business in the near future?

Since I believe that
tech stocks specifically, and the stock market in general, remain
overvalued with tremendous downside risk, and that we are headed
towards a macroeconomic climate vastly worse than the stagflationary
1970’s –a climate likely to pulverize general bond
and stock market indices- I continue to believe that one of the
best places for stock investors to bide their time is in the precious
metals area and other commodity-related industries.

When the coming macroeconomic
“Perfect
Storm” finally blows over, which could be many years
from now, lots of little robot companies will lie in the rubble
like diamonds in the rough. Those who have been following the
robot story will have no trouble jumping on this contrarian opportunity
in the making.

Even today, an individual
may want to consider investing personal time towards a career
or towards hobbies related to robotic development.

In his article “The
Robots Are Here” (Feb 2004 MIT Technology Review),
Dr. Rodney Brooks, Director of MIT’s Computer Science and
Artificial Intelligence Lab, commented, “I am convinced
that robots are today where computers were in 1978. That’s
about the year that computers started to appear around us in the
way that robots are cropping up today. Of course, it was another
15 years before computers truly became pervasive in our lives.
I think that 15 years from now, robots will be everywhere, as
email and the Web are now.”

One example of a future
projection that agrees with Dr. Brook’s outlook is provided
below:

The
multi-colored areas of the graph that rise above the blue area
depict expected growth in mobile
robotics. The blue area depicts maturation in the fixed robotics
area. This has been around since the 1970’s. Fixed robots
are typically secured to a factory floor or gantry system and
perform assembly line or warehouse distribution functions. In
2003 the annual fixed robot market was around $5 billion.

Industry analyst Jim
Pinto claims
there are now more than 1,000,000 industrial robots in the world.
(Add in mobile robots, and we are closer to 1.5 million total).
The percentage of fixed robots building cars has dropped from
90% as of a few years ago to 50% of total robots. Mobile robots
include 2,300 demolition robots, 1,600 surgical robots, 3,000
underwater robots, and as of Oct 2004 also includes over
one million units of the Roomba vacuum cleaner, up from 12,500
sold in 2000. Dan Kara foresees
sales of one million robots in 2005, and four million in 2006.

The automation business
could be undergoing a generational shift. The
terms “mobile” and “fixed” echo in my
mind a different analogy, namely William Lind’s analysis
of the generational
shift between Third Generation maneuver warfare and Second
Generation “fixed” firepower-attrition warfare in
the 20th century. I sense a historical pattern here where initially
most "experts" will probably fail to grasp the significance
of mobile intelligent machinery. The "robolution" will
probably favor decentralized business initiative and decision-making.
It will probably favor superior operational tempo, opportunistic
exploitation of weak product-market segments, and bold moves that
can completely obsolete competitor's products out from under them.

Where I definitely
do not want to draw an analogy involves the fact
that modern war is typically at best a vicious zero sum game and
more often than not is a massive net destroyer of wealth. Automation
and ethical free enterprise capitalism are both supposed to increase
wealth and provide win-win situations for everyone involved, to
include competitors and society as a whole. (Sportsmanlike competition
is supposed to enhance the socially useful division of labor and
help people find the most productive use for their talents, not
destroy them). More on the social aspects of the "robolution"
later.

GROWTH DRIVERS:

Moore’s
Law: Many computer industry observers expect chip
processing performance to continue doubling about every twenty
months. Each quantum leap in processing power for the same price
(or offering of last generation capacity for half the price) has
opened up whole new business areas. As an example, the ability
to shrink the capabilities of a room full of computers in the
1970’s into an affordable desk top gave us the personal
computer boom of the 1980’s, followed by spreadsheet applications,
the Internet, and streaming video.

Robots are voracious
users of processing power for such purposes as navigation and
mechanical coordination. Tasks that seem very easy for humans
such as manipulating blocks on a table remain hard for robots.
The human brain has remained so heavily geared by evolution towards
physical coordination that ditch-digging seems easy compared to
adding numbers, even though it consumes vastly more neural power.

The chart below helps
us visualize how continued growth in processing power, expressed
as MIPS (Million Instructions Per Second) may correspond towards
increasingly intelligent and autonomous robots.

Michael Kanellos
wrote in“Invasion
of the Robots” that, "A 1,500-gram human brain
can churn at about 100 trillion instructions a second, according
to a paper recently published by Carnegie Mellon's Dr. Moravec--nearly
three times the power of the Earth Simulator, the world's most
powerful computer. Under Moore's
Law, processing performance could increase to the point
where machines can work almost as well as the human brain. `Better
yet, sufficiently useful robots don't need full human-scale
brainpower’ Moravec wrote in his paper. "Commercial
and research experience convinces me that mental power like
that of a small guppy, about 1,000 MIPS, will suffice to guide
mobile utility robots reliably through unfamiliar surroundings,
suiting them for jobs in hundreds of thousands of industrial
locations and eventually hundreds of millions of homes.’"

OTHER GROWTH DRIVERS

“Bottom-up” driver: declining components costs.
Other growth drivers will work in tandem with Moore’s
Law. They relate to steady improvements in each of the various
modules that make up robots while costs steadily decline.

We have already
seen declining industrial robot costs. According to a World
Robotics Survey released in Oct 2003, the average cost of
a robot in 2002 was only one fifth of the cost of a robot of
similar performance in 1990. In the United States in 1990 an
average industrial robot costs the equivalent of $115,000, the
report said. By 2001 the price had
dropped to $83,000. [Presumably the average robot of 2001
has superior performance compared to 1990 –author]. Prices
in Europe were as low as $51,000.

Elegant Japanese
“entertainment” robots such as the AIBO and QRIO
(described later) might suggest to many that the industry will
mainly advance through the debut of flashy new systems. Instead,
I believe that it is more likely that the evolutionary pattern
for most American companies will probably involve applying incremental
improvements in robot parts to achieve incremental business
profitability. Many of the profitable niches will be highly
specialized, unglamorous, and industrial in nature. However,
the know-how and profitability achieved in these areas can provide
vital stepping stones for more glamorous and comprehensive applications
later.

Advances in one area can help free up bottlenecks and create
cost-effective applications in other areas, and vice versa,
in a kind of cascading effect. As a hypothetical example, an
advance in laser geo-positioning navigation technology that
enables a mobile robot to precisely find its way on a farm may
take advantage of a previously unused four-legged walking technology
for both mobility and planting seeds in uneven ground. An advance
in a hand-like manipulator may take advantage of an unused visualization
sensor technology to achieve a new capability to pick blackberries.
The development of a new probe to check metal fatigue may take
advantage of new propulsion systems that can crawl through pipes
or over ships and planes.

The business opportunity
comes from being able to grasp before competitors how an advance
in one area may create a profitable new opportunity in another
area. (Linear regression analysis in computer programming
and constraint analysis in process flow engineering
are examples of formal academic tools used to understand how
freeing up capacity in some areas allows one to use untapped
capacity in other areas.)

Redefined
work concepts: In essence, mobile robotics is
about bringing factory automation concepts out of the factory
and into the outside world, to include our homes.

A redefined work
concept can create whole new jobs in new industries. As one
example, in the 1800’s, improving the concept of the wagon
as a mode of transportation to move goods and people overland
through time and space went far beyond redefining the jobs served
by horses, mules, and teamsters. It led to canals, and then
to railroads, and then to air travel.

As robots become
more versatile and autonomous, I believe it likely that they
will not only create new industries, but will multiply jobs
for both themselves and for humans. (More on this issue in Part
Five).

Redefined
product concepts. The first phase of fixed robotic
development involved expanding the behavioral sequences of machinery
on factory floors. On a conceptual level, these improvements
were similar to augmenting the mechanical sequences of player
pianos, washing machines, and dishwashers found in people’s
homes. Fixed robots have generally had a very limited capacity
to sense and move within their environments.

The current phase
of robotic development involves increasing the ability of robots
to autonomously sense and intelligently interact on a mechanical
level with their environments, both externally and internally.
Existing machines can be made more robotic by incorporating
within them devices that self-diagnose and mechanically fix
their own problems.

Dr. Steve
Jacobsen, head of Salt Lake City-based SARCOS
Inc, said in an interview for the book Robo
Sapiens (pages 217-218): “There is a big thing
in the military called condition-based maintenance…almost
everywhere they are trying to extend capital assets…it
all comes down to knowing about the machine. And once you have
done this, almost every machine becomes a robot in the classical
sense. It has sensors, actuators, brains, and it responds to
situations. But one of the problems in robotics is that we’ve
clung to the notion that it’s got to look like a person,
and if it fails, they say, `See –robots failed,’
and yet they are all around you.”

Sometimes
a marginal improvement in the performance of a dated machine
concept can make a big difference. The article, "Australian
Scientists Develop the World's Largest Robot," talks
about how roboticists inserted robotic controls inside a
3,500
tonne huge walking crane with a 100-meter boon. The crane's
dragline reflected 1950's technology. The new controls "increased
productivity of a dragline by around 4 per cent, which may
not
sound all that much - would save the typical Australian coal
mine $3 million a year, or $280 million for Australia as
a whole."
This innovation is currently being marketed in the U.S. by
P&H
Mining Equipment as the Universal
Dragline System.

“Top-Down”
Economic Drivers

Some
sample macro-demand factors: Germany has
a 32-hour work week, and needs robots to offset high
industrial labor
costs. The US military needs robots to reduce casualties and
supplement its all-volunteer force. Japan has an aging
population
that will need more care. In addition, the Japanese definitely
do not want to import foreign workers.

Almost every advanced
industrial society has certain “pain points” that
motivate government and private industry to subsidize or otherwise
encourage various forms of robotic development.

The fear
factor: Societies are locked into global “value
competition” (cf. the “value war” concept
promoted by Advanced Competitive
Strategies, Inc.). They must steadily strive to increase
product quality while decreasing costs, or fall by the economic
wayside. Retarded robotic implementation in particular, and
declining automation in general, means declining economic, military,
and political power. According to the Grandfather
Economic Report, "The U.S. manufacturing base has declined
from 30% of GDP in 1953 (when we had a trade surplus) to 13.8%
in 2002." This has correlated with America's aforementioned
rising trade deficits, skyrocketing indebtedness, and declining
productivity.

Dean Kamen,
founder of the rapidly growing FIRST
robotics hobbyist organization (For Inspiration
and Recognition of Science
and Technology),
pointed out at the October 2004 RoboNexus convention
that China and India graduate vastly more engineers than
the U.S. (As a more recent update, the 2005 National Academy
of Sciences study "Rising
Above the Gathering Storm" reports
on page ES-8 that in 2004 China graduated about 500,000
engineers, India 200,000, and the U.S. only 70,000). Kamen
commented
that: "The
US needs to change its culture so scientists and engineers,
not
athletes,
are
heroes.
[If
it doesn’t]
this country will continue to get what it celebrates.”
He has added,
"You have teenagers thinking they're going to make millions
as NBA stars when that's not realistic for even 1 percent
of
them. Becoming a scientist or engineer is."

HYPERGROWTH
DRIVER:

The computer revolution
has been about rapidly increasing processing power while continually
reducing costs. The Internet revolution has been about repeating
this pattern with the expansion of electronic information distribution.
The robot revolution will be about repeating this pattern in
regard to increasingly intelligent forms of physical labor.
This will be especially true once robots become intelligent
enough to design and build even more intelligent robots. We
may see an interesting compounding and even acceleration effect.

Robots will be able
to download complex skill sets over the Internet, by wireless,
or by other means. This may eliminate learning curve problems
and set up times for complex tasks, allowing robots to adeptly
switch back and forth between unrelated projects. Productivity
could become astronomical by today’s standards.

If the current pace
of Moore’s Law continues, robots may become as smart as
humans in twenty to thirty years. Imagine ten to twenty years
beyond that, when the average processing power of autonomous
robots might be a thousand times that of an average human or
greater. Imagine that robots develop self-generative creative-analytical
capabilities commensurate with their processing power.

Imagine if we ask
robots that are a thousand, ten thousand, or a million times
more intelligent than us to design and build star ships. Imagine
also that there are billions of them around to undertake this
project.

The veneer of civilization
is thin, and the passions of man are many. A tug of war exists
between those forces which favor the upward striving and ennoblement
of man, and those that threaten to regress our societies back
down to the level of the jungle. If the former win out, then
interstellar travel may be closer to our lifetimes than many
of us think.

Disclaimer: This
report is for research/informational purposes only, and should
not be construed as a recommendation of any security. Information
contained herein has been compiled from sources believed
to be reliable. There is however, no guarantee of its accuracy
or completeness.

Bill Fox is VP/Investment Strategist, America
First Trust. Bill welcomes phone calls and email responses to
this article. His most current contact
information is at his web site: www.amfir.com.